How To Allocate Marketing Budgets Across Channels

The next question to answer is how to allocate marketing budgets across channels – offline and online - and how to spread the online investment across the various online/digital channels.

The next question to answer is how to allocate marketing budgets across channels – offline and online - and how to spread the online investment across the various online/digital channels.

A report from Forrester Research shows the estimated allocation of marketing funds offline vs. online and across the digital channels.

Here are some conclusions from that report:

In 2016, the average firm was expected to allocate 30% of their marketing budget to online, this rate is expected to grow to 35% by 2019

Search engine marketing will capture the largest share of online spend with online display (banner ads, online video, etc.) taking the second largest share

Social media investments will continue to grow as an overall share of online spend, but will only represent about 15% of the total online spend

Mobile marketing has grown to a point that it’s no longer tracked in the forecast and it’s presumed to be considered across all channels

Conclusions from the 2014 report (for comparison):

29% of a marketing budget was allocated to online/digital channels

Search engine marketing (SEO & SEM) captured the largest share of online spend at 47% or about 14% of the firm’s total marketing budget

Online display advertising (banner ads, remarketing & retargeting) captured the next biggest share of the online spend at about 34% of total online spend and about 10% of the total marketing budget

Social media investments were estimated at 6% of total online spend and a bit less than 2% of the total marketing budget

Mobile garnered about 10% of the total digital marketing budget and slightly less than 3% of the total marketing budget.

The chart below shows strong increases in digital channel investment. Of the five digital tactics represented in the report, each expected to see at least a 42% increase in investment.

Traditional channels did not fare nearly as well. Print, radio, and television were expected to see a net decrease in total marketing investments.

Once again, these are averages.

How marketing funds are ultimately allocated is driven by the nature of the business, the competitive marketplace, and how target customers behave through the buying funnel.

Which Marketing Strategies & Tactics Are Getting The Best Results?

In these recent surveys by leading digital marketing research firms, respondents reported on what marketing activities generated the best ROI.

The charts below provide some answers to this question. This survey was conducted in 2014:

Marketing technologies and automation are proving effective at bringing together the most effective marketing tactics (email marketing, organic search, and content marketing) to achieve better results.

Which Social Media Channels Should I Invest In?

An August 2016 report from eMarketer attempts to project social media penetration by social platform through 2020.

While there are no direct investment assessments associated with this particular study, it does show noteworthy trends among the major social channels.

Facebook is expected to remain king, with 90% of social media users utilizing in the platform. Instagram is expected to grow, from 32% penetration to 47% by 2020.

Other social channels with baked in advertising features, such as Pinterest and Twitter, will continue to have relatively low penetration, peeking around 33% of users by 2020.

This data suggests an emphasis should be made on Facebook and Instagram channels for social advertising.

Expected Changes In Total Marketing Budgets

The report above from cmosurvey.org show a steady, single digit increase in marketing spend over the following twelve months. The largest increase in projected marketing spend occurred shortly after the recession of the late 2000’s, but continues to fluctuate between 4 and 8%.

Changes in Specific Digital Channel Investments

In an August 2016 report from eMarketer, 75% of respondents expect to increase their Google Adwords investments in the next 12 months (more than any other digital channel). Facebook, which is quickly becoming a respectable competitor to paid search, expects to see increased investments by 69% of respondents.

Instagram and Twitter, by comparison, expect to see increased investments from less than half of respondents (41% and 21% respectfully). Snapchat, which only recently launched its own ad platform, was at the bottom of the list, with only 15% of respondents expecting to increase investments into 2017.

This report bodes well for "digital traditionalists," who continue advocating the importance of search over social channels.

Changes in Traditional Versus Digital Marketing Spend

This chart, also from cmosurvey.org, shows the sharp contrast between digital growth and offline decline.

For nearly a half decade, investments in traditional advertising have consistently dropped by single digit percentages each year.

Digital marketing spend, by comparison, has consistently grown by double digit increments year after year.

This means businesses are shifting their marketing spend.

What used to be spent on radio, television, and newspaper is now being spent on search, email, and social.

This trend is expected to continue for the next several years.

The chart below from eMarketer projects the following: “in 2017, TV ad spending will total $72.01 billion, or 35.8% of total media ad spending in the US. Meanwhile, total digital ad spending in 2017 will equal $77.37 billion, or 38.4% of total ad spending.”

This marks the first time in history digital spend surpassed TV ad spend in the US.

And the gap will only widen - by 2020, digital spend will surpass television by 36%.

Percentage Of Marketing Budget Spent On Digital

Digital spend is only a portion of total marketing spend for most businesses. For 50% of businesses surveyed, digital represents less than 40% of total marketing spend.

Businesses who rely more heavily on the internet to generate sales (e.g. an ecommerce business), invest a greater percentage of their marketing budget towards digital.

For more traditional businesses, which rely on offline AND online activity to fill the sales funnel, a healthy mix of marketing investment is to be expected.

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As President, Chris is responsible for leading all the day-to-day operations of WebStrategies. His work has been featured on the Google Analytics and Hubspot blogs, and he’s a regular columnist for the Richmond Times Dispatch.

You're spot on. It's a really big field, especially Inbound marketing. Some relate it just to SEO, but it's a really really bigger field than just that :)

My advice to you would be to just start small, focus on the audience and how to reach out to them. And learn as you go with little steps. Focus on starting with a strategy, objectives (they don't have to be realistic, even touching the surface helps here) and metrics to see how you go. After you've done a bit of work, analyse the results and try to figure out what went great and what went wrong.

A big chunk of marketing is psychology and understand the people really helps here. Good luck!

I believe these marketing spends look considerably different in the micro-business market. Since 2008, there have been a growing number of professionals starting their own one-person shops, often as freelancers, coaches or strategists. They have no employees aside from hiring out virtual assistants or business coaches on a one-time or as-needed basis, and their marketing is primarily online through "free" channels and social media advertising. Often, after investing in a trade show or conference based solely on the number of expected participants (despite having no strategy for how to convert participants into customers) the next spend is on unfocused social media ad efforts. Following the low converting campaign, this market will spend hundreds or thousands hiring a "social media manager," an "ad specialist" or taking a course to teach them in 9 weeks how to (supposedly) be a full fledged marketing expert in their own right. Without the budget or metrics for selecting a qualified marketing team, these businesses often fade into obscurity. I believe that if this market were included in this study, it would paint a very different and skewed picture of the ROI if marketing in American businesses.

Agree that sole trader micro-businesses often spend nothing, then sink more than they can afford in something which has little impact. Since the goal of this business is to keep one person employed, I'd actually say personal networking is probably the way to go - back it up with a well-structured LinkedIn profile and lots of recommendations.
However a small business with 2 or 3 staff is a very different beast, also not well covered here. In this case I'd say more proactive online lead-generation via a (clean, simple) site with some great calls to action/offers to get leads, plus an email newsletter to stay in touch, is the best way to supplement the personal networking. Drive top of the funnel traffic via PPC or content marketing depending on how long you can wait for returns. Most small businesses probably need some PPC to get things happening faster.
That said, the overall analysis here and the trends are spot-on.

Hi Chris, good research work is done on the marketing budget. Especially the estimate of social network users till 2020. This information will help in building better social media strategies. thank you, Chris, for sharing the information.

Great blog here! The success of an online marketing will depend on the strategy that the company has. The effectiveness of one’s company campaign of a certain product or services can be measured in many different ways such as the visibility of the product and services online and the patronage of the customers.